Mav
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Post by Mav on Jul 23, 2013 19:07:22 GMT -8
Thanks. Lots of CC to listen through.
So, accountants in the crowd, or those who play them on TV, that's basically +$7.8B in cash, -$18.8B via capital return to the cash balance? Net reduction of $11B?
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Post by Red Shirted Ensign on Jul 23, 2013 19:08:41 GMT -8
“Q: Can you tell us the ending basic share buyback count was?”
“A: During June quarter, we concluded first $2 billion ASR program begun in December. Final shares in on those. Did second ASR program of $12 billion, started at end of April. Received 23.5 million shares initially. At some point during fiscal ‘14, that program will close and we’ll get the final number. Bought back $4 billion on open market in June quarter. Received 9 million shares. ...
Lowered diluted share count by 22.9 million shares, looking forward before any further buybacks or issuance to employees, would expect to see 11 million share benefit from the things that occurred during the June quarter.”
So how many shares did they actually buy back?
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Mav
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Post by Mav on Jul 23, 2013 19:14:17 GMT -8
I didn't hear anything in the CC to make me think a new, less expensive iPhone is coming, except that they emphasized how strongly the 4/4s was selling, which indicates that the realize the strength of the market there. Katy Huberty tried to lead TC/PO into a comment by asking why GM won't decline if they ship new products as expected, but they didn't go for it. I think it's coming, but find no new evidence here. I'm seeing 924 million diluted shares this Q compared to 946 million last Q. The 22.9 million shares purchased doesn't jibe exactly with the reduction in diluted shares because of employee compensation shares added. Here's the link to the data from Apple in the event someone doesn't know it: www.apple.com/pr/library/2013/07/23Apple-Reports-Third-Quarter-Results.htmlI'm also interpreting PO's remarks to mean that Apple has committed to purchase an additional 11 million shares in Q4, though I'm not sure if he meant that they had committed to this figure by the end of June, or if it includes the first weeks in July. They'll burn through their cash assigned for repurchase of shares quickly at this rate, which leads me to think that they suspect share price will increase in the coming quarters, without this same level of buyback. To me, this means they either expect WS to come to their collective senses, or they'll ship strong new products. iPhone 5S could have a similar margin profile to iPhone 5. The cheaper iPhones, same deal. And even if "new iPhone" GM is a bit lower sequentially, if Apple sells a bunch of them in the September quarter, the margin mix should remain mostly stable. That might or might not point to "disappointing" iPad sales for the quarter as more people wait on new form factor iPads and new-screen iPad minis. Accountants, feel free to chime in, but I recall anti-dilution buybacks to be treated differently from outright share repurchase (y'know, the one that looks to reduce share count from almost 950 to something like 850-875M at current prices). Semi-related: If Apple can get diluted share count under 900M - and it could choose to do so by the end of this fiscal quarter! - then it becomes possible for Apple to do a 2-for-1 share split without seeking shareholder approval (since it's authorized to issue 1.8B shares).
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Post by artman1033 on Jul 23, 2013 19:14:25 GMT -8
Thanks. Lots of CC to listen through. So, accountants in the crowd, or those who play them on TV, that's basically +$7.8B in cash, -$18.8B via capital return to the cash balance? Net reduction of $11B? I am obviously not an accountant, but I did take Federal income tax in college. (It was a single book 40 years ago!) I believe you failed to include the bond proceeds + 16,958,000,000
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SomeJuan
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Post by SomeJuan on Jul 23, 2013 19:16:25 GMT -8
“Q: Can you tell us the ending basic share buyback count was?” “A: During June quarter, we concluded first $2 billion ASR program begun in December. Final shares in on those. Did second ASR program of $12 billion, started at end of April. Received 23.5 million shares initially. At some point during fiscal ‘14, that program will close and we’ll get the final number. Bought back $4 billion on open market in June quarter. Received 9 million shares. ... Lowered diluted share count by 22.9 million shares, looking forward before any further buybacks or issuance to employees, would expect to see 11 million share benefit from the things that occurred during the June quarter.” So how many shares did they actually buy back? Red, TC had an opportunity to spike the ball and missed it. He should have come right out and said "we bought back 22.9 million shares from you creeps this quarter" but missed the chance. Now we have to scratch our heads and do some math.
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Mav
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Post by Mav on Jul 23, 2013 19:16:27 GMT -8
Red, I think you just have to take it literally. Whatever Apple's reported as diluted shares is the share count to work from.
Like many here, I'm very pleased that Apple got aggressive on buybacks this quarter. "The secret's out", but not before Apple completed what, 20% of the program in a single quarter?
EDIT: artman - you're right, I missed it, thanks. Though I didn't see it as "added cash" so much as actual, real-life, hard-to-believe Apple debt.
Accounting for the bond proceeds, Apple's available cash hasn't been affected at all - I guess it may be net up almost $6B from last quarter. From my uneducated look at the balance sheet, Apple seems more than capable of buying up another 20 or so million shares next quarter if it wanted. There's plenty of asset classes to choose from to raise the necessary capital. It could do another round of Apple bonds, but who knows.
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Post by yellowhandman on Jul 23, 2013 19:21:18 GMT -8
Actually, I wonder if the introduction of new products (finally) from Fall onwards is going to result in a return to the old 'problem' of Apple's guidance being consistently lower than actual. It's relatively easier for the company to project sales of existing products based on historical trends (which is probably why Apple has been hitting its guidance during this product lull), compared to projecting sales of new products - especially if these are in brand new categories like watches and TVs. It would seem terribly risky for Oppenheimer to build in anything more than the most conservative of projections when projecting guidance including new product categories.
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Mav
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Post by Mav on Jul 23, 2013 19:24:38 GMT -8
I don't see any problem.
It's not _automatic_ that Apple will hit the top end or slightly exceed range guidance, but Oppenheimer has so far shown two things: (1) he's pretty damn serious about his guidance range, and (2) he can account for uncertainty by broadening the range (which he did for revs, from the previous $2B to $3B).
GM remaining stable for fiscal Q4 may be a large part of why AAPL did OK in AH. Combined with the guided rev range, it looks like there will be some influence of a new product (probably iPhone) but with low overall GM impact at the end of the day (and hey, iPhone IS the margin king after all, so unless iPhone GM really tanks, higher iPhone rev mix won't "hurt" GM).
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Post by Red Shirted Ensign on Jul 23, 2013 19:26:31 GMT -8
I don't see any problem. It's not _automatic_ that Apple will hit the top end or slightly exceed range guidance, but Oppenheimer has so far shown two things: (1) he's pretty damn serious about his guidance range, and (2) he can account for uncertainty by broadening the range (which he did for revs, from the previous $2B to $3B). GM remaining stable for fiscal Q4 may be a large part of why AAPL did OK in AH. Combined with the guided rev range, it looks like there will be some influence of a new product (probably iPhone) but with low overall GM impact at the end of the day (and hey, iPhone IS the margin king after all, so unless iPhone GM really tanks, higher iPhone rev mix won't "hurt" GM). Nice statement.....the outlook has certainly stabilized...
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Post by pauls on Jul 23, 2013 19:50:57 GMT -8
If Apple is buying shares so aggressively, maybe others will too.....It's hard not to be freshly optimistic after news of the buybacks, the "VERY busy Fall", and the relief of strong iPhone numbers. It's way too early to worry about iPad numbers, imo, considering the still-dominate position Apple enjoys with tablets and ecosystem. All in all, this call takes some heat out of the cries for 'new categories' (which will come when they come). The future is brighter than it's been the last few quarters, and by October, it promises to be very bright indeed.
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Post by Deleted on Jul 23, 2013 19:51:37 GMT -8
Catching up to the Q&A with Tavis McCourt, the extra 11M shares comes from the balance of the 12B with the two institutions. In other words, Apple repurchased approx. 34M shares and took delivery on only 23M shares in the June quarter.
That's bullish and it should send a message to WS that perhaps didn't fully register before AH closed:
Apple: We're buying BIG. In fact, we bought 200% more than what anyone expected (30M shares vs. 10M if straight-lined from April 1 2013 - Dec. 31, 2015).
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Post by Deleted on Jul 23, 2013 19:55:56 GMT -8
I don't see any problem. It's not _automatic_ that Apple will hit the top end or slightly exceed range guidance, but Oppenheimer has so far shown two things: (1) he's pretty damn serious about his guidance range, and (2) he can account for uncertainty by broadening the range (which he did for revs, from the previous $2B to $3B). GM remaining stable for fiscal Q4 may be a large part of why AAPL did OK in AH. Combined with the guided rev range, it looks like there will be some influence of a new product (probably iPhone) but with low overall GM impact at the end of the day (and hey, iPhone IS the margin king after all, so unless iPhone GM really tanks, higher iPhone rev mix won't "hurt" GM). I could be wrong, but if my records are correct, this is the first time in the last 12 quarters apple has failed to beat its revenue guidance (either beating a single point guidance, or beating the top figure in a guidance range).
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Post by tuffett on Jul 23, 2013 19:56:59 GMT -8
I'm confused about all these various buyback figures...$18B returned to shareholders ($15B via buyback?), $4B to buy 9 million shares, 22 million shares bought... Can anyone provide clarity? I haven't had the chance to listen yet - just going by what I've been reading. It's confusing, but this is my tentative WAG: Apple disclosed it plunked down 12B with two financial institutions, which acquired half of what it could have (or Apple is taking delivery of additional shares outside the June quarter). The other 4B was spent in the open market, reacquiring 9M shares ($444 per share). In other words, it breaks down like this: 1. $4B purchased 9M shares on open market 2. $6.42B (of total 12B) utilized with 2 financial institutions, reacquiring 14.5M shares. 3. Total initial delivery: 23.5M shares. 4. The total $16B is booked as repurchase activity cost, but showing only 23.5M shares were delivered. That's my WAG based on what I've read so far...I'm sure others will connect the remaining dots with more clarity. After listening to the call, I interpreted it slightly differently: 1. 4M repurchased with $1.95B (old repurchase program) 2. 23.5M repurchased with $12B (new ASR program) 3. 9M repurchased with $4B (open market repurchases) If I'm correct, this totals 36.5M shares repurchased with $17.95B. WOW. Average price based on these numbers is $492 - seems high. That is a huge amount of float reduced for a single quarter. I'm impressed. EDIT: Adding on 11M shares that will be recognized next Q but with the money already spent means 47.5M with $17.95B. An average of $374...now it seems a bit low Perhaps they have been selling puts to reduce their cost basis? Wonderful news if I have it right, but I must be missing something
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Post by Deleted on Jul 23, 2013 20:07:37 GMT -8
If they took an initial delivery of 23.5M shares on the 12B plus the 9M on the 4B, why the deferral on recognizing the higher # of shares repurchased in the June quarter?
I'm ignoring the 1.5M shares reducing share count that originated from the March quarter. Also, the shares related to employee stock options in the June quarter.
Bottom line, 34-36M shares repurchased is a powerful message, even with a deferral of 11M shares that are to be removed from the share count in the Sept. quarter.
I should probably read the 10Q....
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Post by Deleted on Jul 23, 2013 20:09:42 GMT -8
I don't see any problem. It's not _automatic_ that Apple will hit the top end or slightly exceed range guidance, but Oppenheimer has so far shown two things: (1) he's pretty damn serious about his guidance range, and (2) he can account for uncertainty by broadening the range (which he did for revs, from the previous $2B to $3B). GM remaining stable for fiscal Q4 may be a large part of why AAPL did OK in AH. Combined with the guided rev range, it looks like there will be some influence of a new product (probably iPhone) but with low overall GM impact at the end of the day (and hey, iPhone IS the margin king after all, so unless iPhone GM really tanks, higher iPhone rev mix won't "hurt" GM). I could be wrong, but if my records are correct, this is the first time in the last 12 quarters apple has failed to beat its revenue guidance (either beating a single point guidance, or beating the top figure in a guidance range). Well yeah, but I think it's different when Apple quotes a range, as the "new and improved" guidance means "not less than and not more than..."
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Post by Deleted on Jul 23, 2013 20:12:10 GMT -8
My individual rankings. Don't know how PED calculates overall, but it looks like I did better than April results. Revenue #5th EPS #24th iPhones #16th iPods #17th Macs #Dead Last iPads Tied for #5th iTunes #7th GM Tied for 45th The grouping of estimates is getting tighter and tighter. For instance: Revenue the top 5 were off by 100,000,000 or less (0.28%) iPads the top 5 were off by 1,385,000 or less (9.47%) iTunes the top 7 were off by 100,000,000 or less (2.51%) GM there were 14 Tied at 45th, the top 45 all being off by 40¢ or less (1.08%). My gut is telling me that the grouping is going to get even tighter as analysts become more comfortable with the new Guidance metric. Toss the top 5 high/low outliers and analyst consensus is going to get much closer to actual results. As I mentioned earlier, I think unit sales estimates should be eliminated from these analyst comparisons (and not just because I do badly in these categories). It doesn't matter what is being sold by a multi-product firm, as long as they meet/exceed revenue expectations. I noticed that several analysts did not include unit numbers this time around. I probably won't either for October's Smackdown.
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Post by Red Shirted Ensign on Jul 23, 2013 20:13:02 GMT -8
“Q: Can you tell us the ending basic share buyback count was?” “A: During June quarter, we concluded first $2 billion ASR program begun in December. Final shares in on those. Did second ASR program of $12 billion, started at end of April. Received 23.5 million shares initially. At some point during fiscal ‘14, that program will close and we’ll get the final number. Bought back $4 billion on open market in June quarter. Received 9 million shares. ... Lowered diluted share count by 22.9 million shares, looking forward before any further buybacks or issuance to employees, would expect to see 11 million share benefit from the things that occurred during the June quarter.” So how many shares did they actually buy back? Red, TC had an opportunity to spike the ball and missed it. He should have come right out and said "we bought back 22.9 million shares from you creeps this quarter" but missed the chance. Now we have to scratch our heads and do some math. Are we sure that Apple bought back 22 million shares or did they actually reduce by 33 million? Oppy's comment that he....." Would expect to see 11 million shares benefit from the things that occurred during the June quarter" causes me to wonder is the share count at quarter end ( vs. midpoint) might be 11 million lower..... Just wondering what he meant with this statement ( transcript garbling fully a possibility). In edit: you guys post too fast. Defer to Mercel above
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mark
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Post by mark on Jul 23, 2013 20:13:14 GMT -8
Sounds more like a last quarter (CY) story. What do you expect to change in the current quarter to make it a "story"? You don't think the new products in September, including a whole new class of Iphone, worldwide rollout, IOS7, new Ipad...won't e the story. I heard "fall" ... that begins on Sep 21'st or Sep 22'nd. I also heard "fall, and throughout 2014", that could also mean that it won't necessarily be immediately in the first 9 days of fall ... it could be a few weeks into fall, like October sometime.
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Post by Deleted on Jul 23, 2013 20:18:03 GMT -8
Mercel, that's a question for Apple IR. The way things are going, Apple could well finish the buyback "early", particularly if it thinks this is the cheapest Apple stock will be for a while. Buying up about _double_ what we thought it would was a savvy move in retrospect. Might've saved a couple percent on that "extra" block of 10 or so million shares! ;D Ending early is a possibiity, so is not spending every dollar authorized.
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SomeJuan
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Post by SomeJuan on Jul 23, 2013 20:20:59 GMT -8
Red, TC had an opportunity to spike the ball and missed it. He should have come right out and said "we bought back 22.9 million shares from you creeps this quarter" but missed the chance. Now we have to scratch our heads and do some math. Are we sure that Apple bought back 22 million shares or did they actually reduce by 33 million? Oppy's comment that he....." Would expect to see 11 million shares benefit from the things that occurred during the June quarter" causes me to wonder is the share count at quarter end ( vs. midpoint) might be 11 million lower..... Just wondering what he meant with this statement ( transcript garbling fully a possibility). In edit: you guys post too fast. Defer to Mercel above Red, All I know is TC and PO sent a big FU to the street with a major buyback in a VERY short time frame, the next day or so will flush out the actual. Still a very big FU. And too make it salient, they said "we are not done", and even more salient, "we will complete the buy back a year earlier than anticipated" FU Street...
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mark
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Post by mark on Jul 23, 2013 20:23:00 GMT -8
What price did AAPL get their shares at? From notes I saw 23.5 M shares with $12 B. That is over $500 per share. That cannot be right. Anyone have a better idea of price paid per share? Nothing wrong with $500/share if Apple bought back maturing, but underwater, grants for more than market, which I highly expect they did. I'm not sure, but I don't think they can do that.
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Post by SomeJuan on Jul 23, 2013 20:35:21 GMT -8
Full CC Transcript sans CC Q@A,
Apple Conference Call Transcript Q2 2013
Transcript Call Date 07/23/2013 Operator: Good day, everyone and welcome to the Apple Incorporated Third Quarter Fiscal Year 2013 Earnings Release Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead. Nancy Paxton - IR: Thank you. Good afternoon, and thanks to everyone for joining us. Speaking first today is Apple's CFO, Peter Oppenheimer; and he'll be joined by CEO, Tim Cook; and Gary Wipfler, for the Q&A session with analysts. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding revenue, gross margins, operating expenses, other income and expense, stock-based compensation expense, taxes, and future products. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple's Form 10-K for 2012, the Forms 10-Q for the first and second quarters of 2013, and the Form 8-K filed with the SEC today, along with the associated press releases. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective date. I'd now like to turn the call over to Peter Oppenheimer for introductory remarks. Peter Oppenheimer - SVP and CFO: Thank you Nancy. We are pleased to report the results of our third fiscal quarter. We established a new June quarter record for iPhone sales driving Apple's strongest June quarter revenue ever. Revenue for the quarter was $35.3 billion up $300 million or 1% from the year ago quarter, and at the high end of our guidance range. Gross margin was 36.9% also at the high end of our guidance range and operating margin was $9.2 billion representing 26% of revenue. Net income was $6.9 billion translating to diluted earnings per share of $7.47. Channel inventories declined sequentially by $1 billion during the June quarter this year meaning that sell through was $36.3 billion. In contrast channel inventory increased $700 million from the beginning to the end of the June quarter last year meaning that sell through was $34.3 billion in that quarter. As such our June quarter sell through increased by $2 billion or 6% year-over-year ahead of our 1% sell in revenue growth. As for the details of the quarter, I'd like to begin with iPhone. We sold 31.2 million iPhones compared to 26 million in the year ago quarter, an increase of 5.2 million or 20%. We had a sequential decrease of about 600,000 iPhones in channel inventory in the June quarter of about 31.8 units. iPhone sales were ahead of our expectations and we were particularly pleased with very strong year-over-year growth in iPhone sales and a number of both (indiscernible) in emerging markets including the U.S., U.K., Japan, Brazil, Russia, India, Taiwan and Singapore. iPhone 5 remains by far the most popular iPhone, but we were also very happy with sales of iPhone 4 and 4S. We ended the quarter with about 11 million units of total iPhones in channel inventory and ended within our target range of 4 to 6 weeks of iPhone channel inventory.
iPhone unit sales in the U.S. increased 51% compared to the year ago quarter and based on research recently published by comScore, iPhone once again achieved the number one spot in the U.S. smartphone market for this three months period ending in May with over 39% share. iPhone sales were also very strong in Japan growing 66% year-over-year. iPhone is the top selling smartphone in Japan based on the latest published quarterly data from IDC and Apple is the number one or number two selling smartphone manufacture in most markets IDC tracks including North America, Western Europe, Russia, Turkey, Australia, Hong Kong, Thailand, Malaysia and Singapore. The most recently published study by Kantar measured at 93% loyalty rate among iPhone owners significantly higher than our competitors and iPhone continues to lead in terms of customer experience. Not only has iPhone earned the top spot in customer satisfaction from J.D. Power and Associates, in unprecedented non-consecutive times. It has also received the top customer satisfaction ranking in a number of surveys including the recent Quality Insights survey of smartphone customers in South Korea. iPhone also continues to be the smartphone of choice for business. Given the security and stability of iOS, enterprise and government customers around the world continue to deploy iPhone on their networks in ways that go far beyond personal productivity. Companies that build tens of thousands of custom apps to improve every aspect of their business. Global companies including American Airlines, Cisco, General Electric, Roche and SAP have deployed more than 25,000 iPhones each across their organizations. U.S. government organizations such as NASA's Jet Propulsion Lab, the National Oceanic and Atmospheric Administration, BATF and the National Geospatial-Intelligence Agency are supporting and managing thousands of iPhones on their networks and continue to create both customer-facing and internal iOS Apps and just this past quarter, iOS 6 was granted FIPS 140-2 validation by the U.S. federal government and approval by the U.S. Department of Defense to connect to their networks. Combining sales to business, government and education customers iPhone holds a 62.5% share of the U.S. commercial market based on the latest quarterly data published by IDC. Turning to iPad, we sold 14.6 million iPads during the quarter compared to 17 million in the year-ago quarter. The tough year-over-year comparison was driven by both the significant channel inventory increase and the first full quarter of the availability of the 3rd generation iPad in the year-ago. We built 1.2 million units of iPad channel inventory in the June quarter last year, whereas we reduced channel inventory by 700,000 units in the June quarter this year. Factoring in this 1.9 million unit channel inventory swing, iPad unit sell through was down 3% year-over-year. We exited the quarter with about 4.1 million units of iPad channel inventory within our target range of 4 to 6 weeks.
Customers continue to love their iPads for the second consecutive time in the two year history of the survey iPad ranked number one in the 2013 U.S. Tablet Satisfaction Survey by J.D. Power and Associates. And again in its latest study published today (indiscernible) reported that iPad accounted for 84.3% share of tablet web usage by customers in the U.S. and Canada its highest level this year. In every major industry around the world companies are developing, deploying, and supporting apps for iPad. Government organizations as well as global enterprise companies across diverse fields, including automotive, insurance, energy services and healthcare are using iPad and custom apps to create unique, meaningful experiences for their employees, partners and customers. The USDA's national agricultural statistics service has deployed thousands of iPads to in-person interviewers resulting in higher response rates and decreased costs. Companies, including Eli Lilly, Novartis, Cathay Life, Roche and SAP have deployed over 20,000 iPads each across their organizations. (Indiscernible) we are pleased with sales of 3.8 million Macs which is a 7% decline from the year ago quarter better than our expectations. IDC estimates that the global personal computer market contracted by 11% during the June quarter indicating that Macs gained share. In June, we introduced two new versions of MacBook Air and customer response has been great. Wired Magazine described the new 13 inch MacBook Air as nearly flawless, citing its phenomenal battery life, processing performance, feather like chassis and super-fast Wi-Fi. Additionally last month, we provided a sneak peak at our next generation Mac Pro, engineered around workstation graphics with dual GPUs, PCI Express-based flash storage, high-performance Thunderbolt 2, next generation Xeon processors, ultrafast memory and support for 4K video. The new state-of-the-art Mac Pro will be assembled in the U.S. and will be available later this year. We were excited to release the developer preview of OS X Mavericks last month. With more than 200 new features, OS X Mavericks brings Maps and iBooks to the Mac, introduces Finder Tags and Tabs, enhances multi-display support for power users, delivers new core technologies for breakthrough power efficiency and performance and includes an all-new version of Safari. OS X Mavericks will be available for customers in the fall. We ended the quarter with just below our four to five week target range of Mac channel inventory. Our U.S. education institution business had a great quarter, generating its highest quarterly revenue ever. The results were fuelled by all-time record quarterly iPad sales of 1.1 million units in addition to strong June quarter Mac sales. The State of Maine Learning Technology Initiative, which provides the state's middle school and high school students and teachers with personal computing solutions, allowed individual school districts to choose which products to purchase rather than standardize on a single statewide solution. We're very proud that an estimated 94% of the 69,000 total units selected this year were Apple products and we're extremely pleased to have received the Los Angeles School Board of Education's unanimous approval to begin the first phase of a massive rollout of iPads for students across the district starting this fall. The district is the second largest in the United States and plans to equip everyone its 650,000 students with a tablet by 2014.
We continue to be very pleased with the growth and strength of the Apple ecosystem. With the broadest geographic reach and depth of content in the industry, our iTunes Store has generated record billings of $4.3 billion in the June quarter culminating in our best month and best week ever for App Store billings at the very end of the quarter. The quarter's iTunes billings translated to quarterly revenue of $2.4 billion up 29% from the year-ago quarter, with strong growth in revenue from both content and apps. The continued strong iTunes sales combined with other software and service revenue resulted in total quarterly revenue of $4 billion from iTunes, software and services. We added some great new video content to iTunes and Apple TV. Last month, we announced HBO GO and WatchESPN, are now available directly on Apple TV, joining programming from Hulu Plus, Netflix streaming catalog, live sports from MLB, NBA and NHL as well as Internet content from Google, YouTube and Flickr. Sky News, Crunchyroll and Qello are offering live news, sports and current TV programming. Apple TV users can now choose from a broad selection of programming including over 60,000 movies in over 230,000 TV episodes as well as the world's largest collection of music on the iTunes Store. iTunes users have downloaded more than 1 billion TV episodes and 390 million movies from iTunes to-date and they are purchasing over 800,000 TV episodes and over 350,000 movies per day. We recently celebrated the five year anniversary of our amazing App Store. Our developers have now created more than 900,000 iOS apps including 375,000 apps made for iPad. Popularity of these apps remains incredibly strong. Cumulative app downloads have surpassed 50 billion and app developers have made over $11 billion for their sales through the App Store half of which was earned in the last four quarters. Our vibrant ecosystem continues to drive tremendous user engagement with our devices and services. We now have over 320 million iCloud accounts and 240 million Game Center accounts and our customers have sent almost 900 billion iMessages, uploaded over 125 billion photos and received over 8 trillion push notifications. Thanks to the stability and security and popularity of the iOS platform. The iOS devices continue to have a strong lead over Android in the enterprise. In its most recently published quarterly enterprise device activations report. Good Technology's found that among its corporate clients iPhone 5 was by far the most activated device of any kind and iPads represented 88% of all tablet activations. We're continuing to invest in software and services to make the ecosystem and user experience even richer. This fall we released a beta version of iWork for iCloud, bringing pages, numbers and keynotes to the web. With iWork for iCloud users will be able to generate complex, great looking letters, reports, and fliers generate complex yet beautiful spreadsheets and develop and deliver beautiful presentations with powerful graphics and special effects, all from within a web browser. And we're extremely excited about the fall launch of iOS 7 with its stunning new user interface and many great new features including Control Center, AirDrop, and iTunes Radio, smarter multitasking and enhancements to notification center, photos, Safari and Siri.
I'd now like to turn to the Apple retail stores. Revenue for the quarter was $4.1 billion, approximately equal to the year ago quarter. The store has experienced strong growth in iPhone sales and had their most successful MacBook Air launch to-date. We opened six new stores across five countries during the quarter and ended the quarter with a total of 408 stores including a 156 outside United States. We expect to open nine new stores in the September quarter bringing us to a total of 27 new store openings in fiscal '13. We also relocated four stores in the June quarter that had outgrown their former space and we expect to complete a total of 23 such relocations in fiscal '13. With an average of 405 stores open in the June quarter, average revenue per store was $10.1 million compared to $11.1 million in the year ago quarter. Retail segment income was $667 million. We hosted 84 million visitors to our stores during the quarter, which translates the 16,000 visitors per store per week. Operating expenses were $3.8 billion and included $488 million in stock compensation expense. OI&E was $234 million and the tax rate for the quarter was 26.9%. Turning to our cash, we ended the quarter with $146.6 billion in cash, plus short-term and long-term marketable securities compared to $144.7 billion at the end of the March quarter, a sequential increase of $1.9 billion. A $106 billion of our total cash was offshore at the end of the June quarter, and cash flow from operations was $7.8 billion. In early April, we concluded the 1.95 billion accelerated share repurchase program that we initiated in the December quarter, resulting in cumulative retirement of over 4 million shares of Apple's stock under that program. In late April, we executed a very successful debt offering issuing $17 billion of debt across, 3, 5, 10 and 30 year maturities. We paid $2.8 billion in dividends in the quarter and we also utilized a total of $16 billion in cash on share repurchase activity to a combination of a new accelerated share repurchase program and open market purchases. $12 billion of the $16 billion was utilized under a new ASR program initiated with two financial institutions in April. An initial delivery of 23.5 million shares was made under this program, with the final number of shares delivered and average price per share to be determined at the conclusion of the program. Based on the volume weighted average purchase price of Apple's stock over the program period, which will conclude in fiscal '14. In addition to the new ASR, we executed $4 billion of open market share repurchases, resulting in the retirement of 9 million additional shares. Our Board of Directors has declared a dividend of $3.05 per common share, payable on August 15, 2013 to shareholders of record as of the close of business on August 12, 2013. Now, as we move ahead into the March quarter, I'd like to review our outlook which includes the types of forward-looking information that Nancy referred to at the beginning of the call. We expect revenue to be between $34 billion and $37 billion, compared to $36 billion in the year-ago quarter. We expect gross margin to be between 36% and 37%, reflecting approximately $90 million related to stock-based compensation expense.
We expect OpEx to be between $3.9 billion and $3.95 billion including about $495 million related to stock-based compensation. We expect OI&E to be about $200 million and we expect the tax rate to be about 26.5%. In closing we're pleased with our record June quarter iPhone sales. The strong growth in revenue from iTunes, software and services and the continued enhancement in popularity of our tremendously vibrant ecosystem. We are very excited about the upcoming releases of the stunning new iOS 7 and OS X Mavericks and we are very hard at work on some amazing new products that we will introduce in the fall and across 2014. And with that I'd like to open the call to questions. Nancy Paxton - IR: Thank you Peter and we ask that you limit yourself to one question and one follow-up. Operator may we have the first question please.
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Post by Deleted on Jul 23, 2013 20:48:40 GMT -8
I could be wrong, but if my records are correct, this is the first time in the last 12 quarters apple has failed to beat its revenue guidance (either beating a single point guidance, or beating the top figure in a guidance range). Well yeah, but I think it's different when Apple quotes a range, as the "new and improved" guidance means "not less than and not more than..." But apple beat its new revenue guidance methodology range in Q2. So far we only have 2 quarters under the new guidance methodology with one quarter coming in $603 million above max guidance, and one quarter coming in $177 million below max guidance, Too early to be anything meaningful, but average over last 2 quarters is $390 million above max guidance.
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Post by Deleted on Jul 23, 2013 20:50:55 GMT -8
After listening to the call, I interpreted it slightly differently: 1. 4M repurchased with $1.95B (old repurchase program) 2. 23.5M repurchased with $12B (new ASR program) 3. 9M repurchased with $4B (open market repurchases) If I'm correct, this totals 36.5M shares repurchased with $17.95B. WOW. Average price based on these numbers is $492 - seems high. Of the 36.5 million shares purchased, only 9 million were purchased on the open market. I think the 'why' is important to understand. First of all the ASP of the 1st group of shares is $487.xx. I think these were employee grants that were under water. They were bought back at the Strike they were granted at, with new grants being awarded at today's prices. This may be nothing more than accounting entry. The important thing is that these were maturing (or had matured) and the employees holding them weren't going to benefit from them. Second the 2nd group has an ASP of $510.xx. These were negotiated transactions with one or more institutions. Assuming the Seller's Basis was lower than $510 and they had been held for more than a year, we could see an increase in institutional buying tomorrow as the shares sold are replaced with lower cost shares. AAPL's valuation gets a double bump in this scenario: reduced share count and increased Institutional buying (trading volume). And lastly the 3rd group which has an ASP of $440.xx. If the AH activity on the last day of the quarter was Apple buying, then only 5 million shares were bought through the quarter, where onlookers could see the activity. This could easily explain why I didn't see this volume. Now, knowing that, at minimum an additional 11 million shares will be reported bought back in the September quarter, it would only take another 13 million to get fully diluted share count below 900,000,000. That's important because the BoD has authorized issuance of 1.8 billion shares. Apple could then execute a 2:1 stock split without a new stock issuance resolution. The resolution is just paper work and an SEC filing so no big deal really. I'm just saying. This would have no genuine impact on the value of AAPL shares outside of the emotional factor of owning 2X more than you did the day before.
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SomeJuan
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Post by SomeJuan on Jul 23, 2013 20:57:40 GMT -8
After listening to the call, I interpreted it slightly differently: 1. 4M repurchased with $1.95B (old repurchase program) 2. 23.5M repurchased with $12B (new ASR program) 3. 9M repurchased with $4B (open market repurchases) If I'm correct, this totals 36.5M shares repurchased with $17.95B. WOW. Average price based on these numbers is $492 - seems high. Of the 36.5 million shares purchased, only 9 million were purchased on the open market. I think the 'why' is important to understand. First of all the ASP of the 1st group of shares is $487.xx. I think these were employee grants that were under water. They were bought back at the Strike they were granted at, with new grants being awarded at today's prices. This may be nothing more than accounting entry. The important thing is that these were maturing (or had matured) and the employees holding them weren't going to benefit from them. Second the 2nd group has an ASP of $510.xx. These were negotiated transactions with one or more institutions. Assuming the Seller's Basis was lower than $510 and they had been held for more than a year, we could see an increase in institutional buying tomorrow as the shares sold are replaced with lower cost shares. AAPL's valuation gets a double bump in this scenario: reduced share count and increased Institutional buying (trading volume). And lastly the 3rd group which has an ASP of $440.xx. If the AH activity on the last day of the quarter was Apple buying, then only 5 million shares were bought through the quarter, where onlookers could see the activity. This could easily explain why I didn't see this volume. Now, knowing that, at minimum an additional 11 million shares will be reported bought back in the September quarter, it would only take another 13 million to get fully diluted share count below 900,000,000. That's important because the BoD has authorized issuance of 1.8 billion shares. Apple could then execute a 2:1 stock split without a new stock issuance resolution. The resolution is just paper work and an SEC filing so no big deal really. I'm just saying. This would have no genuine impact on the value of AAPL shares outside of the emotional factor of owning 2X more than you did the day before. Greg, Great insight, and hopefully spot on, though the numbers and quantity of the buyback still have me numb. I do hope the cost of the BB is lower than you project, or Braeburn in Nevada, has some splainin to do Lucy!
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Post by Deleted on Jul 23, 2013 21:00:02 GMT -8
Nothing wrong with $500/share if Apple bought back maturing, but underwater, grants for more than market, which I highly expect they did. I'm not sure, but I don't think they can do that. What they can't do is purchase in a manner that causes the share price to go up. All rules governing a buyback relate to open market purchases. It would be impossible to buy a 2 month supply of trading volume without sending the stock through the roof. Personally I think the rules are stupid. Some institution/s got paid $510/share while the retail trader was getting $410 on the open market. I think that $510 is the signal we should all be focusing on.
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SomeJuan
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Post by SomeJuan on Jul 23, 2013 21:07:08 GMT -8
The end of the day takeaway, from the buyback is this...
"We believe in what we are doing, why we do it, and what we have coming in the near future, if you investors do not believe in us, we will buy all you got"
Bring it on...
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Deleted
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Post by Deleted on Jul 23, 2013 21:08:38 GMT -8
Well yeah, but I think it's different when Apple quotes a range, as the "new and improved" guidance means "not less than and not more than..." But apple beat its new revenue guidance methodology range in Q2. So far we only have 2 quarters under the new guidance methodology with one quarter coming in $603 million above max guidance, and one quarter coming in $177 million below max guidance, Too early to be anything meaningful, but average over last 2 quarters is $390 million above max guidance. Actually we have 5 quarters under the new methodology. FQ3/2012 FQ4/2012 FQ1/2013 FQ2/2013 and FQ3/2013. Apple exceeded Revenue Guidance (whether single digit or lower of range) every time. They exceeded upper range just once. I think its safe to say that when PO gives Guidance...he means it. In the future you're going to be able to immediately dismiss estimates lower, or higher, than the range. We won't see the huge beats of the past, but I think that is a good thing.
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Mav
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Post by Mav on Jul 23, 2013 21:10:27 GMT -8
Mercel, keep us posted on your 10-Q reading. That interpretation of "11M share benefit in September quarter" or something like that makes much more sense if Apple actually bought up 23M net shares and "ordered" a purchase of 11M more for later. Considering Apple by my estimates was going to buy ~100-120M shares, that is a HUGE buy and a very loud statement from Apple management. Must...try...to keep inherent bullishness...in check...
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Post by tiggs2012 on Jul 23, 2013 21:37:47 GMT -8
First of all the ASP of the 1st group of shares is $487.xx. I think these were employee grants that were under water. They were bought back at the Strike they were granted at, with new grants being awarded at today's prices. This may be nothing more than accounting entry. The important thing is that these were maturing (or had matured) and the employees holding them weren't going to benefit from them. Think you're off on this assessment. Considering Apple phased out options for RSU's per the 10-K filing, there's generally only been RSU grants to employees. A share is a share and can't go underwater, only to 0 in an extreme case of BK. Even worst case for an RSU granted last year at $700+ would still have a value of $400+ today. Thats one of the nice things about RSU's is that they can't go underwater. I think your logic here is flawed. AAPL has repurchased/repriced options in the distant past but this would require SEC filings. Jobs in fact did an exchange of options to RSU's way back per SEC filings and ironically lost billions in doing so.
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